Five Tax-Fairness Achievements We’re Grateful For This Thanksgiving
The Inflation Reduction Act (IRA): Just when it looked like the prospects for tax reform were hopeless after a year-and-a-half of trying, in the summer of 2022 President Biden struck a deal with Congress that raised taxes on the biggest corporations and Wall Street traders and cracked down on wealthy and corporate tax cheats. Each component of the IRA is worthy of our gratitude (see below) but the overall package and dramatic legislative breakthrough that delivered it are in themselves symbols of the triumph of tax fairness over decades of failed Republican trickle-down dogma.
The Corporate Alternative Minimum Tax (CAMT): For years, huge profitable corporations have gotten away with paying little or nothing in federal income taxes because they figure their earnings two ways. They calculate “book income” to show big profits and attract investors, while whittling down “taxable income” as much as possible to dodge tax bills. The Inflation Reduction Act’s CAMT imposes a 15% minimum tax on the book income of corporations with over $1 billion in profits, preventing massive corporations from playing sleight of hand to make their federal taxes disappear.
The Stock Buyback Tax: Corporations waste hundreds of billions of dollars every year buying back their own stock, which has the effect of further enriching their already wealthy executives and shareholders at the expense of worker wages and productive investment. The IRA imposes a 1% tax on share repurchases, raising revenue for public services while discouraging this corporate self-dealing.
Restored Funding for the Internal Revenue Service: Years of GOP cuts to the IRS budget had left the agency with too few resources to catch rich and corporate tax cheats, who were evading hundreds of billions of dollars in taxes every year. The Inflation Reduction Act promised $80 billion for the agency to improve both tax enforcement and customer service. Results were almost immediate: tens of millions of dollars collected from a handful of wealthy tax evaders, as the first step in a crackdown on 1,600 rich cheaters; and Microsoft got a past due tax bill for $29 billion.
Plans to Better Tax Billionaires: Despite their vast fortunes, billionaires can pay little or nothing in income taxes because our system is not set up to properly tax them. Both President Biden and Senate Finance Committee chairman Ron Wyden have proposed special taxes on billionaires that would tax the biggest source of their income—the increase in the value of assets they don’t sell—that now goes completely untaxed. These bills haven’t made it into law yet but we’re grateful to have two such powerful champions pushing for a tax system that works for everyone, not just the ultra-rich.